One of NMI's Guiding Principles is to "balance financial and social returns." As a result, NMI carefully evaluates and seeks to measure the "social returns" for each of its investments. Since beginning to invest in 2009, the NMI Global Fund and the NMI Frontier Fund have developed a rigorous approach to measuring and reporting on "Social Performance" for all of their MIVs, MIV Managers and Portfolio MFIs. In addition, NMI has adopted policies and procedures to assure that at the corporate level NMI and the NMI Funds conduct all of their activities in accordance with best practices in the microfinance industry and the highest standards of "Social Responsibility."
The NMI Funds follow a flexible and pragmatic approach to measuring and reporting on Social Performance. "Social Performance" is defined by the Social Performance Task Force sponsored by CGAP as "the effective translation of an institution's mission into practice in line with accepted social goals." These social goals can include:
- Providing financial services to an increasing number of poor and low income people in a sustainable manner
- Improving the quality and appropriateness of financial services available to poor and low income people through systematic assessment of their specific needs
- Creating benefits for the clients of microfinance institutions and their families by (i) increasing social capital, assets and income, (ii) increasing access to financial services, (iii) reducing vulnerability to economic shocks, and (iv) fulfilling basic needs
- Improving the social responsibility of MFIs towards their clients, employees, and communities
NMI believes that measuring and reporting on Social Performance is important because tracking social, as well as financial, indicators allows for a more holistic assessment of MIV and MFI performance. In addition, measuring and reporting on Social Performance helps to provide evidence indicating the impact that microfinance has on the lives of poor and low-income people, particularly with respect to its role as an effective tool in helping to alleviate poverty and generate employment. Further, donors and investors can utilize Social Performance information to decide which MIV Managers and MFIs are most focused on achieving social outcomes and are actually producing consistent and measurable social results.
For measuring and reporting on Social Performance, NMI encourages and supports its MIV Managers and MFIs to utilize the Social Performance Standards Report developed by the CGAP Social Performance Task Force and the Microfinance Information Exchange (MIX Market). This Report collects and provides standardized data and reporting on 11 core indicators selected by the Social Performance Task Force. The Report is designed to be a simple, flexible, practical tool for general industry use and to allow for transparency and global comparability among MFIs by having MFIs report their Social Performance data to the MIX Market.
Figure 1 sets forth the Social Performance Pathway and Indicators Framework associated with the Social Performance Standards Report. NMI recognizes that not all of its MIV Managers and Portfolio MFIs are able or willing to adopt and implement the Social Performance Pathway and Indicators Framework when one of the NMI Funds makes its initial investment. As a result, NMI follows a pragmatic and flexible approach which considers the circumstances and capacities of each MIV Manager and MFI and allows for the gradual implementation of Social Performance measurement and reporting in accordance with their respective circumstances and capacities. Further, the NMI Funds support and make available training with respect to Social Performance Management issues through the NMI PA Facility and other industry resources.
During 2010, each of the MIVs and MFIs in which the NMI Funds invested agreed to measure and report on Social Performance using the Social Performance Standards Report or another comparable tool. Several of the Global Fund MIV Managers have their own proprietary measurement and reporting systems. In addition, several of the NMI Fund MIV Managers have produced their own Social Performance Reports and won awards for their transparency and commitments to environmental, social and governance issues in their investment decisions.
As part of its commitment to Social Performance and its broader commitment to Social Responsibility, NMI endorsed and supported in 2010 the Smart Campaign - the microfinance industry's client protection initiative - and Principles for Investors in Inclusive Finance. The Smart Campaign recognizes the need to assure safe and responsible treatment of microfinance clients and seeks to make the Six Principles of Client Protection "part of the DNA of microfinance." These Principles are set forth in Box 1 and the NMI Funds seek to assure that all Portfolio MIVs and MFIs adopt and support these Principles. More than 1,500 MFIs, microfinance support organizations, investors, donors and individual industry professionals have endorsed the Smart Campaign since it was launched in October 2009.
The Principles for Investors in Inclusive Finance was launched in January 2011 at the Dutch Ministry of Foreign Affairs in The Hague. NMI had consulted with the Working Group developing the Principles during 2010 and was an initial signatory, along with 39 other global investors. The Principles were developed as an initiative of Her Royal Highness Princess Maxima, the UN Secretary-General's Special Advocate for Inclusive Finance for Development and in conjunction with the UN-backed Principles for Responsible Investment ("UNPRI") and CGAP. Signatories assert their goal of supporting and investing in those financial services providers that offer responsible financial services, including a wide range of quality services to clients. They also embrace transparency and sustainability in the provision of financial services to the poor.
With respect to assuring clear and transparent pricing for microfinance products and services, NMI in 2010 supported and endorsed the dual mission of MFTransparency.org. This dual mission is to facilitate the collection and dissemination of transparent micro- credit pricing information and to educate stakeholders and enhance their understanding of microcredit pricing. MFTransparency.org has completed "Transparent Pricing Initiatives" in nine countries and is working in nearly 20 more. Its methodology is to pro- vide an innovative combination of training, interest rate disclosure, education and policy advice to a broad range of industry stakeholders on a country- by-country basis. MFTransparency.org recently concluded its "Transparent Pricing Initiative in India" with the participation of more than 80 MFIs and covering more than 80% of the Gross Loan Portfolio in India. NMI is hopeful that with these initiatives and transparent pricing information of this type more readily available, better decisions can be made by all industry stakeholders. NMI will also seek to assure that all its Portfolio MIVs and MFIs utilize transparent pricing and full disclosure in connection with all of their loan and other financial services products.
In addition to these specific activities supporting Social Performance and Social Responsibility in the microfinance industry, NMI has adopted several policies and practices focused more broadly on its corporate responsibility. These include the NMI Business Integrity Policy, the NMI Microfinance Exclusion List, the NMI Anti-Money Laundering Policy, and embracing and supporting the UN Global Compact. More information on these policies and practices can be found through the links below.